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ArcelorMittal South Africa
Investors’ Day

12 September 2007
Agenda


• South Africa at a glance
• ArcelorMittal South Africa’s standing
• ArcelorMittal’s involvement
• Strategy going forward
• Commitment to the economy & community
  – Safety, Health & Environment
  – Corporate Social Responsibility
• Outlook



                                          1
South Africa at a glance




                           2
The South African Economy

                                                                        Comparison between Steel Consumption,
                                                                               GDP & GDFI (Q2-Q4=FC)
• Current six-year upswing now                                    180
  twice the duration of the last (1993-                           170
  96) upswing and still going strong




                                            Index 1Q 2000 = 100
                                                                                      GDP
                                                                  160                 GDFI
  (GDP output growth at 4.5%).                                                        Steel Cons
                                                                  150
• Real fixed investment doubled                                   140
  during 1994-2005.                                               130
• Inflation way down its 1986 peak.                               120
• Government spending as a share                                  110
  of GDP increased from 22% in                                    100
  2002 to an expected 27% in 2007.                                 90
                                                                        2000 2001 2002 2003 2004 2005 2006 2007




  At GDP growth of 3%, steel demand should be 3%; but at 6% steel demand should be 20%
                                                                                                                  3
Source: STATSSA & SARB Quarterly Bulletin
The South African Market
Geographical sales distribution in 2006                             Manufacturing
                                                                    • Although manufacturing production fell from 6.2% in Q1
                                           ,
                                                                      2007 to 4.6% in Q2 2007, the overall trend for growth in
                                               Africa, 9%
                                                                      this sector is expected to remain on the positive side for
                                                                      the foreseeable future.
 South Africa,
                                                 Europe, 4%
    72%
                                                                    • The slowdown, especially in June to 2% was as a result
                                                  Americas, 4%
                                                                      of the weaker competitiveness emanating from currency
                                                                      strength.
                                               Asia, 11%
                                                                    • Production of durable goods such as motor vehicles
                                                                      was also heavily affected by the higher interest rates
                                                                      and the introduction of the new credit act.
Domestic market segmentation in 2006
                                                                    • The recent weakening of the RAND should improve this
                               Packaging
                                                                      short term situation
                   Other          9%
                    3%
     Automotive
        13%
                                                                    Building
                                                     Building and   • Non-residential building plans passed recovered
                                                     construction
                                                                       strongly over the last couple of years.
     Energy,
                                                         36%
     mining
                                                                    • The relative strength of construction activity and fixed
       9%
                                                                       investment drive not only cement sales but that of steel
                                                                       especially rebar.
      Machinery &
       Equipment
                                                                    • Prospects for construction growth remain positive given
                                               Furniture and
          9%     Pipes and
                                                                       the infrastructural investment drive which is likely to be
                                               applicances
               tube (welded)
                                                    3%
                                                                       undertaken in the run-up to the 2010 Soccer World Cup.
                    18%




 Manufacturing and Building & Construction make up almost 80% of local steel demand
                                                                                                                               4
South African Iron & Steel Sector



• Employed 15 060 people (2005 = 16 476 or down 8,6 %).
• Produced 8,6mt of crude steel (2005 = 8.8mt or down 1,1%).
• Produced 7.7mt of finished steel products.
• Sold 5,8mt finished steel products to the domestic market (incl. imports), up 28%.
• Exported 2,4mt of finished steel products, down by 74%.
• Iron & steel products contributed 1,7% to GDP and 7.5% to the total value of sales by the manufacturing
  industry.




                ArcelorMittal South Africa produced 82% of the country’s liquid steel

                                                                                                     5
ArcelorMittal South Africa’s position
 in context                      Employee reduction (000)
                                                                       14.5
                                                                                            9.8
•   Turnover = R25bn (US$3.8bn).
•   Produces 7.1 mt of liquid steel per annum (long & flat steel).
                                                                       2001                2006
•   A modern, highly competitive supplier of steel products to the
    domestic and global markets.                                     Liquid steel production (mt)
                                                                                            7.1
•   ArcelorMittal South Africa is amongst the world’s lowest           6.5
    quartile cash cost producers of steel.
•   Benefit to the country/community:
•   Direct taxes to the state US$660m (R4 469m).                       2001                2006

•   Remunerate employees US$330m (R2 243m).                          Finished steel products to the
                                                                     domestic market (mt)
•   Procurement from affirmative business enterprises
                                                                                            3.6
    US$110m (R732m).
                                                                       2.3
•   Pay shareholders with cash dividends US$230m (R1 550m).

                                                                       2001                2006


       ArcelorMittal South Africa produced 82% of the country’s liquid steel output in 2006

                                                                                                      6
ArcelorMittal South Africa’s standing




                                        7
Evolution of ArcelorMittal South Africa

                                                                                  2006
                                                                 2004/5
                                                    2002
                                     2001
                       1997
          1989
1928


Iscor                                                                          Mittal
                       Iscor
          Iscor                                  Iscor enters   LNM lifts
                                   Unbundling
founded                                                                        Steel
                       embarks
          privatized                             into           stake to
                                   of steel &
                                                                               merge
                       on major
          and listed                             Strategic      over 50%
                                   mining into
                                                                               with
                       Restruct-
          on the JSE                             partnership    and name
                                   Iscor &
                                                                               Arcelor
                       uring                     with LNM       changes to
                                   Kumba
                                                                               to form
                       programme                 (LNM 34%       Ispat Iscor
                                                                               ArcelorMittal
                                                 share-         LNM and
                                                 Holding)       Ispat
                                                 Start of       merge to
                                                 BAA            form
                                                                Mittal Steel


                        Company in existence for almost 80 years
                                                                                          8
ArcelorMittal South Africa

   Overview of Operations
                                                                                                   Thabazimbi
   •   Flat Steel Products                                                                         iron ore mine
           •   Vanderbijlpark Works – 3.2 Mtpa*
           •   Saldanha Works – 1.1 Mtpa*                                                         Johannesburg
   •   Long Steel Products                                                      Vanderbijlpark
           •   Newcastle Works – 1.5 Mtpa*                                                        Vereeniging
           •   Vereeniging Works – 0.4 Mtpa*
                                                                                                 Newcastle
                                                                  Sishen
                                                                  iron ore
   •   Iron ore supply                                            mine
                                                                                                    Durban
           •   6.25 Mtpa from Sishen                                   South
           •   2.5 Mtpa from Thabazimbi                                Africa
   •   Coke & Chemicals
           •   Coke - 597 000 tpa*
                                                            Saldanha
           •   Tar - 133 000 tpa*
                                                             Cape Town


* Based on 2006 actual final product sales



                                    Steel plants in close proximity of key markets

                                                                                                                   9
Company Structure
                                                           ArcelorMittal


                                              ArcelorMittal South Africa Limited




                   Flat steel products                                                       Long steel products


  Vanderbijlpark Works         Saldanha Steel (Pty) Ltd                      Newcastle Works             Vereeniging Works

Hot rolled                 Hot rolled coil                                 Rolled profiles            Rolled profiles (Vereeniging)
Heavy Plates               - thin and ultra thin                                                      Special profiles (Pretoria)
Cold rolled                                                                                           Forged products (Pretoria & Vereeniging)
Coated                                                                                                Seamless tubes (Vereeniging)
- Galvanised                                                                                          Directly reduced iron (Dunswart)
- Painted                         Coke & Chemicals                            Joint Ventures
- Tinplated
                           Coke batteries
                           - Pretoria                                                                     Mr Eric Samson
                           - Vanderbijlpark
                           - Newcastle                                                                               50%
                           - Vanderbijlpark                                                            Macsteel International
                                                                                         50%
                                                                                                              (Pty) Ltd
                           Tar plant
                           - Vanderbijlpark                                                           Export marketing
                                                                                                      Shipping


                                      Nampak Ltd                                                        Anglo American Ltd

                                                     40%                                                            50%
                                                                             50%         50%             Consolidated Wire
                               Collect a Can (Pty) Ltd                                                  Industries (Pty) Ltd
                           Can Reclamation                                                            Wire drawing


                                          Diversified primary steel producer

                                                                                                                                10
Management
 Rick Reato                CEO
 Kobus Verster             Executive Director, Finance
 Juba Mashaba              Executive Director, Human Resources
 Johan Fourie              Chief Operating Officer
 Hercu Aucamp              General Manager: Sales & Marketing
 Tami Didiza               General Manager: Corporate Affairs
 Heyno Smith               General Manager: Vanderbijlpark Works
 Heinrich Kriel            General Manager: Saldanha Works
 Jaco Stapelberg           General Manager: Newcastle Works
 Jose Gutierrez            General Manager: Vereeniging Works
 Alph Ngapo                General Manager: Coke & Chemicals


   Highly experienced management team with 166 years service amongst them

                                                                            11
Operational improvements over time
                                                                                 Liquid steel output since first production
        Operating margin since first production
 40.0                                                                                                                    7.662
                                                                             8
                                                                                                                                       7.055
                       Data n/a during WW2                   33.1
 35.0
                                                                             7
 30.0
                                                                             6
 25.0
                                                                             5




                                                                    (Mtpa)
(%)




 20.0
                                                                             4
 15.0
                                                                             3

 10.0                                                                        2

      5.0                                                                    1

      0.0                                                                    0
         1935   1945   1955    1965     1975   1985   1995   2005             1934    1944   1954   1964   1974   1984    1994        2004




      • Increase in operating margin since ArcelorMittal investment
      • Steady increase in steel output to 7.1mt. Growth potential to 9.7mt

                           Output levels increased since ArcelorMittal investment.
                Margins were steadily eroded until recent actions established new trading range
                                                                                                                                 12
ArcelorMittal’s involvement




                              13
Search for International partner

• Iscor searched for international partner that could assist with:
  – Business issues:
     • Needed international exposure.
     • Real benchmarking.
     • Knowledge sharing.
  – Technical assistance:
     • R & D.
     • Output/throughput & yield/prime %.
  – Procurement:
     • Coal/alloys/refractories/electrodes.
  – Marketing:
     • European auto markets.
• LNM approached and became the preferred partner.

               Stagnation of efficiencies and a decline in through yield prompted the search
                                                                                               14
  * Through yield: Liquid steel to final product
Technical assistance

• Key technical improvements resulting from the relationship with ArcelorMittal
  includes:
                                           2001                     2006
    Liquid steel production (‘000t)                            6 468                       7 055
    Through yield* (%)
    • Vanderbijlpark                                          82.0%                        83.8%
    • Newcastle                                               88.4%                        91.6%
    • Saldanha                                                94.0%                        94.0%
    Prime output (%)
    • Vanderbijlpark                                          88.0%                        87.2%
    • Newcastle                                               99.3%                        99.97%
    • Saldanha                                                81.0%                        97.0%

                                  Efficiency improvements realised R1 386million savings

                                                                                                    15
  * Through yield: Liquid steel to final product
Capital expenditure assistance
ArcelorMittal contributed towards project management assistance on large capital projects, including:


    Vanderbijlpark:
    BOF control systems.
                                                                ArcelorMittal project
    Blast Furnace C – throat armour repair.
    Blast Furnace D – rebuild.
                                                               management assistance
    New DRI kilns.
    Blast Furnace D – Hot blast stoves.
    New galvanising line.
    2 new cells on Electro galvanising line.




               Newcastle:
               Pulverised coal injection.
               New market coke battery.               Saldanha:
                                                                                   Coke & chemicals:
                                                      Third roll
                                                                                   Market coke expansion.
                                                      grinder.


                     Capital expenditure totalled R3.1bn over the last two years
                                                                                                        16
Strategy going forward




                         17
Vision & long term objectives

                                         Vision
                                                       Quantitative strategic objectives
     Qualitative strategic objectives
                                             • Increase liquid steel production capacity by
• Improve capabilities through a dedicated
                                               2.6mtpa from 7.1mtpa to 9.7mtpa by 2011
  focus on operational excellence
                                               with efficiency improvements contributing
• Industry leading value creation for our
                                               29%
  shareholders
                                             • Increase hot strip mill throughput at
• Positive economic value-add over steel
                                               Vanderbijlpark from 3mtpa to 3.9mtpa
  price cycle
                                             • Increase through yield from 87.3% to 89.3%
• Improve market share in Sub-Saharan
                                               together with significant increases in value-
  Africa
                                               added production
• Build and improve performance culture
                                             • Enhance EBITDA by US$479m by 2011
• Be a responsible corporate citizen           (2006 cost & price base)
                                             • IRR of all capex projects exceeds 20%
                                             • Capture more than 50% of the target market
   Vision: To be a key player in the Sub-Saharan Africa steel market while also being one
                   of the highest operating margin steel producers globally
                                                                                           18
Africa Map & target market
                                           Key elements of strategy


                                            Total Sub-Saharan Africa market
                                            estimated at 18.4mt by 2011, of
                                            which the target market is 14.9mt.

                                            South Africa plans to capture in
                                            excess of 50% of the latter.
         Sub-Saharan African
                                            Focus on products in demand in
            steel market
                                            this market




      Focus is to be a key player in the Sub-Saharan Africa steel market

                                                                               19
Key elements of strategy
                    All operations          De-bottleneck & improve efficiencies
                                            Recapture production losses
  Operations                                Cost leadership
                    Vanderbijlpark &        Increase liquid steel production & add downstream
                    Newcastle               capacity from 2008 to 2011

                    Establish presence      Re-commission existing mill and install new bar/rod mill.
                    in Mozambique           Existing mill 2008 / New mill 2009

     Cost           Vanderbijlpark          Replace aged coke oven batteries by 2011 - more efficient
                                            design
                    Iron ore supply         Secure participation rights in new developments
   Sourcing         Procurement             Cost leadership (TCO)

                    Public/Government/
  Sustainable                               Improve image and relationships
                    Environment/
 Development &                              Address legacies & comply with new legislation
     Social         Investment community
 Responsibility

            Securing raw materials for the expansion strategy is a crucial element
                    Value in Flat products and Volume at long products
                                                                                                 20
Strategy
    We want to be one of the highest operating                   To be a key player in the Sub-Saharan
        margin steel producers globally                                   Africa steel market
                                                            Strategic drivers for creating value for our shareholders:
Strategic goals

                                                            •   Sales revenue:
•   Industry leading value-creation for our shareholders:
                                                                –     Africa vs Export sales.
    – Positive economic value add over the steel cycle.
                                                                –     Increase production of value added products.
•   Sub-Saharan market leader:
                                                            •   Cost reduction:
    – 80% sales into Africa.
                                                                –     Efficiency improvements & technology upgrade (PCI).
                                                                –     Raw materials initiatives.
•   Improve operating capabilities:
                                                                –     Iron ore expansion projects.
    – Value-creating throughput increases of 2.6mtpa.
                                                                –     Reduce dependence on imported coking coal.
                                                                –     Procurement initiatives.
•   Build on our existing performance culture:
    – Create an environment that generates true employee
        pride and attracts, develops and retains top-       •   Throughput expansion:
        performing people.                                      –    Productivity improvements.
                                                                –    Productivities and de-bottlenecking.
•   Be a responsible corporate citizen.                         –    Capital investments.

                                                            •   Corporate Social Responsibility:
                                                                –    Investment in community, environment & human
                                                                     resources.

           To be a key player in the Sub-Saharan Africa steel market while also being one
                      of the highest operating margin steel producers globally
                                                                                                                     21
Liquid steel development – 2006 to 2011
(Tonnes ‘000)
 12 000


                                                                1 887
 10 000

                                                 500
  8 000                         220


  6 000
                                                                             9 662

  4 000
               7 055

  2 000




                2006      New DRI kilns at   Efficiencies   Projects under   2011
                              Vdbp                           investigation

          Efficiency improvements play an important role in our expansion strategy
                                                                                     22
Commitment to the Economy & Community




                                        23
Safety focus
Lost Time Injury Frequency Rate (Employees and Contractors) The impact of the overall SHE programme
                                                                                                           is evident in our safety performance
                                          7
Lost Time Injury frequency rate (LTIFR)




                                                                                                           indicators. The following was achieved
                                                                                                           during the first 6 months:
                                          6
                                                                                                          • H107 performance negatively affected by
                                                                                                              Blast Furnace rebuild.
                                          5                                                               • ArcelorMittal South Africa achieved 26
                                                                                                              days without LTI (about 3.7m LTI free man
                                                                                                              hours).
                                          4
                                                                                                          • 172 days without an LTI at Saldanha
                                                                                                              Works - new record.
                                          3                                                               • 1m LTI free hours achieved:
                                                                                                              – 4x at Vanderbijlpark Works.
                                          2                                                                   – 3x at Newcastle Works.
                                              2002          2003    2004     2005     2006     2007
                                                     IISI            ArcelorMittal South Africa (LTIFR)


                                                            Blast Furnace D rebuild impacted on our most recent safety record
                                                                                                                                                 24
Implementing an ambitious Corporate
Social Responsibility strategy
                                                                                            Waste/By-
                                      Air Pollution                Water
        ISO 14001
                                                                                             product
                                      Management                 Management
                                                                                           Management


                               •   Air pollution biggest   •   Saldanha and          •   75% of waste/by-
•   All production
                                   environmental risk.         Vanderbijlpark have       products is recycled
    facilities are certified
                                                               zero effluent status.     or sold within the
    besides the
                               •   Planned projects:                                     group.
    Dunswart DR Kiln                                       •   Newcastle to follow
                                    - Coke gas cleaning
    operation                                                  in 2008 after
                                   system                      completion of         •   Target is to achieve
                                   - New dust/fume             crystalliser plant.       a sale/ recycling rate
•   Target for Dunswart
                                   extraction system at    •   ArcelorMittal South       of above 90% by
    certification is end
                                   both Vereeniging            Africa’s consumption      2011.
    2008.
                                   and Vanderbijl plant        is world class at 3.2
                                   - EAFMeltshop at            m3/ton of LS
                                   both Vereeniging            produced.
                                   and Vanderbijl plant
                                   - New sinter off gas
                                   cleaning system

                                         Future focus is on air quality

                                                                                                            25
Corporate Social Responsibility
                                                                                           Current CSR projects
                                                                                               •   ArcelorMittal South Africa Science Centre
                                       Committed towards
                                           “making a
                                                                                                   -   Partnership between Gauteng Department of Education and
                                          sustainable
                                                                                                       ArcelorMittal South Africa
                                          difference”.
                                                                                                   -   1 690 learners & teachers (Sedibeng District) receive maths
                                                                                                       & science classes from highly trained teachers
                                                                                                   -   Renovations, upgrading & operations sponsored by
                                                                                                       ArcelorMittal South Africa (R8,5m in 2006).
                                                                                                   -   High tech computer centre now completed (2007)
                                                                           Improving
                                                                           education.
  Corporate social
                                                                           Enhancing housing
responsibility aligned
                                                                                               •   Enterprise Development Fund to assist SME’s in
                                                                              conditions.
  with government
                                                                                                   downstream steel sector (R250m)
                                                                              Addressing
     initiatives.
                                                                               HIV/Aids

                                            CSR                                                •   Gas cylinder project in conjunction with
                                                                                                   Department of Minerals & Energy.

                                                                                               •   HIV/AIDS program.

                                                                                               •   West Coast Business Development Centre.
                                                           Forming strategic
              Invested R220m in
                                                             alliances with
            Social Projects aimed at
                                                              government
            empowering historically
                                                             departments
                disadvantaged                                                                  •   Bophelong Community Project.
                 communities.




                                   CSR focus is on Education, Housing and Job Creation

                                                                                                                                                    26
Thank you




ArcelorMittal South Africa
Investors’ Day

12 September 2007

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Arcelor Mittal, South Africa, Investor Presentation, Paris Sept2007 Rick Reato

  • 2. Agenda • South Africa at a glance • ArcelorMittal South Africa’s standing • ArcelorMittal’s involvement • Strategy going forward • Commitment to the economy & community – Safety, Health & Environment – Corporate Social Responsibility • Outlook 1
  • 3. South Africa at a glance 2
  • 4. The South African Economy Comparison between Steel Consumption, GDP & GDFI (Q2-Q4=FC) • Current six-year upswing now 180 twice the duration of the last (1993- 170 96) upswing and still going strong Index 1Q 2000 = 100 GDP 160 GDFI (GDP output growth at 4.5%). Steel Cons 150 • Real fixed investment doubled 140 during 1994-2005. 130 • Inflation way down its 1986 peak. 120 • Government spending as a share 110 of GDP increased from 22% in 100 2002 to an expected 27% in 2007. 90 2000 2001 2002 2003 2004 2005 2006 2007 At GDP growth of 3%, steel demand should be 3%; but at 6% steel demand should be 20% 3 Source: STATSSA & SARB Quarterly Bulletin
  • 5. The South African Market Geographical sales distribution in 2006 Manufacturing • Although manufacturing production fell from 6.2% in Q1 , 2007 to 4.6% in Q2 2007, the overall trend for growth in Africa, 9% this sector is expected to remain on the positive side for the foreseeable future. South Africa, Europe, 4% 72% • The slowdown, especially in June to 2% was as a result Americas, 4% of the weaker competitiveness emanating from currency strength. Asia, 11% • Production of durable goods such as motor vehicles was also heavily affected by the higher interest rates and the introduction of the new credit act. Domestic market segmentation in 2006 • The recent weakening of the RAND should improve this Packaging short term situation Other 9% 3% Automotive 13% Building Building and • Non-residential building plans passed recovered construction strongly over the last couple of years. Energy, 36% mining • The relative strength of construction activity and fixed 9% investment drive not only cement sales but that of steel especially rebar. Machinery & Equipment • Prospects for construction growth remain positive given Furniture and 9% Pipes and the infrastructural investment drive which is likely to be applicances tube (welded) 3% undertaken in the run-up to the 2010 Soccer World Cup. 18% Manufacturing and Building & Construction make up almost 80% of local steel demand 4
  • 6. South African Iron & Steel Sector • Employed 15 060 people (2005 = 16 476 or down 8,6 %). • Produced 8,6mt of crude steel (2005 = 8.8mt or down 1,1%). • Produced 7.7mt of finished steel products. • Sold 5,8mt finished steel products to the domestic market (incl. imports), up 28%. • Exported 2,4mt of finished steel products, down by 74%. • Iron & steel products contributed 1,7% to GDP and 7.5% to the total value of sales by the manufacturing industry. ArcelorMittal South Africa produced 82% of the country’s liquid steel 5
  • 7. ArcelorMittal South Africa’s position in context Employee reduction (000) 14.5 9.8 • Turnover = R25bn (US$3.8bn). • Produces 7.1 mt of liquid steel per annum (long & flat steel). 2001 2006 • A modern, highly competitive supplier of steel products to the domestic and global markets. Liquid steel production (mt) 7.1 • ArcelorMittal South Africa is amongst the world’s lowest 6.5 quartile cash cost producers of steel. • Benefit to the country/community: • Direct taxes to the state US$660m (R4 469m). 2001 2006 • Remunerate employees US$330m (R2 243m). Finished steel products to the domestic market (mt) • Procurement from affirmative business enterprises 3.6 US$110m (R732m). 2.3 • Pay shareholders with cash dividends US$230m (R1 550m). 2001 2006 ArcelorMittal South Africa produced 82% of the country’s liquid steel output in 2006 6
  • 9. Evolution of ArcelorMittal South Africa 2006 2004/5 2002 2001 1997 1989 1928 Iscor Mittal Iscor Iscor Iscor enters LNM lifts Unbundling founded Steel embarks privatized into stake to of steel & merge on major and listed Strategic over 50% mining into with Restruct- on the JSE partnership and name Iscor & Arcelor uring with LNM changes to Kumba to form programme (LNM 34% Ispat Iscor ArcelorMittal share- LNM and Holding) Ispat Start of merge to BAA form Mittal Steel Company in existence for almost 80 years 8
  • 10. ArcelorMittal South Africa Overview of Operations Thabazimbi • Flat Steel Products iron ore mine • Vanderbijlpark Works – 3.2 Mtpa* • Saldanha Works – 1.1 Mtpa* Johannesburg • Long Steel Products Vanderbijlpark • Newcastle Works – 1.5 Mtpa* Vereeniging • Vereeniging Works – 0.4 Mtpa* Newcastle Sishen iron ore • Iron ore supply mine Durban • 6.25 Mtpa from Sishen South • 2.5 Mtpa from Thabazimbi Africa • Coke & Chemicals • Coke - 597 000 tpa* Saldanha • Tar - 133 000 tpa* Cape Town * Based on 2006 actual final product sales Steel plants in close proximity of key markets 9
  • 11. Company Structure ArcelorMittal ArcelorMittal South Africa Limited Flat steel products Long steel products Vanderbijlpark Works Saldanha Steel (Pty) Ltd Newcastle Works Vereeniging Works Hot rolled Hot rolled coil Rolled profiles Rolled profiles (Vereeniging) Heavy Plates - thin and ultra thin Special profiles (Pretoria) Cold rolled Forged products (Pretoria & Vereeniging) Coated Seamless tubes (Vereeniging) - Galvanised Directly reduced iron (Dunswart) - Painted Coke & Chemicals Joint Ventures - Tinplated Coke batteries - Pretoria Mr Eric Samson - Vanderbijlpark - Newcastle 50% - Vanderbijlpark Macsteel International 50% (Pty) Ltd Tar plant - Vanderbijlpark Export marketing Shipping Nampak Ltd Anglo American Ltd 40% 50% 50% 50% Consolidated Wire Collect a Can (Pty) Ltd Industries (Pty) Ltd Can Reclamation Wire drawing Diversified primary steel producer 10
  • 12. Management Rick Reato CEO Kobus Verster Executive Director, Finance Juba Mashaba Executive Director, Human Resources Johan Fourie Chief Operating Officer Hercu Aucamp General Manager: Sales & Marketing Tami Didiza General Manager: Corporate Affairs Heyno Smith General Manager: Vanderbijlpark Works Heinrich Kriel General Manager: Saldanha Works Jaco Stapelberg General Manager: Newcastle Works Jose Gutierrez General Manager: Vereeniging Works Alph Ngapo General Manager: Coke & Chemicals Highly experienced management team with 166 years service amongst them 11
  • 13. Operational improvements over time Liquid steel output since first production Operating margin since first production 40.0 7.662 8 7.055 Data n/a during WW2 33.1 35.0 7 30.0 6 25.0 5 (Mtpa) (%) 20.0 4 15.0 3 10.0 2 5.0 1 0.0 0 1935 1945 1955 1965 1975 1985 1995 2005 1934 1944 1954 1964 1974 1984 1994 2004 • Increase in operating margin since ArcelorMittal investment • Steady increase in steel output to 7.1mt. Growth potential to 9.7mt Output levels increased since ArcelorMittal investment. Margins were steadily eroded until recent actions established new trading range 12
  • 15. Search for International partner • Iscor searched for international partner that could assist with: – Business issues: • Needed international exposure. • Real benchmarking. • Knowledge sharing. – Technical assistance: • R & D. • Output/throughput & yield/prime %. – Procurement: • Coal/alloys/refractories/electrodes. – Marketing: • European auto markets. • LNM approached and became the preferred partner. Stagnation of efficiencies and a decline in through yield prompted the search 14 * Through yield: Liquid steel to final product
  • 16. Technical assistance • Key technical improvements resulting from the relationship with ArcelorMittal includes: 2001 2006 Liquid steel production (‘000t) 6 468 7 055 Through yield* (%) • Vanderbijlpark 82.0% 83.8% • Newcastle 88.4% 91.6% • Saldanha 94.0% 94.0% Prime output (%) • Vanderbijlpark 88.0% 87.2% • Newcastle 99.3% 99.97% • Saldanha 81.0% 97.0% Efficiency improvements realised R1 386million savings 15 * Through yield: Liquid steel to final product
  • 17. Capital expenditure assistance ArcelorMittal contributed towards project management assistance on large capital projects, including: Vanderbijlpark: BOF control systems. ArcelorMittal project Blast Furnace C – throat armour repair. Blast Furnace D – rebuild. management assistance New DRI kilns. Blast Furnace D – Hot blast stoves. New galvanising line. 2 new cells on Electro galvanising line. Newcastle: Pulverised coal injection. New market coke battery. Saldanha: Coke & chemicals: Third roll Market coke expansion. grinder. Capital expenditure totalled R3.1bn over the last two years 16
  • 19. Vision & long term objectives Vision Quantitative strategic objectives Qualitative strategic objectives • Increase liquid steel production capacity by • Improve capabilities through a dedicated 2.6mtpa from 7.1mtpa to 9.7mtpa by 2011 focus on operational excellence with efficiency improvements contributing • Industry leading value creation for our 29% shareholders • Increase hot strip mill throughput at • Positive economic value-add over steel Vanderbijlpark from 3mtpa to 3.9mtpa price cycle • Increase through yield from 87.3% to 89.3% • Improve market share in Sub-Saharan together with significant increases in value- Africa added production • Build and improve performance culture • Enhance EBITDA by US$479m by 2011 • Be a responsible corporate citizen (2006 cost & price base) • IRR of all capex projects exceeds 20% • Capture more than 50% of the target market Vision: To be a key player in the Sub-Saharan Africa steel market while also being one of the highest operating margin steel producers globally 18
  • 20. Africa Map & target market Key elements of strategy Total Sub-Saharan Africa market estimated at 18.4mt by 2011, of which the target market is 14.9mt. South Africa plans to capture in excess of 50% of the latter. Sub-Saharan African Focus on products in demand in steel market this market Focus is to be a key player in the Sub-Saharan Africa steel market 19
  • 21. Key elements of strategy All operations De-bottleneck & improve efficiencies Recapture production losses Operations Cost leadership Vanderbijlpark & Increase liquid steel production & add downstream Newcastle capacity from 2008 to 2011 Establish presence Re-commission existing mill and install new bar/rod mill. in Mozambique Existing mill 2008 / New mill 2009 Cost Vanderbijlpark Replace aged coke oven batteries by 2011 - more efficient design Iron ore supply Secure participation rights in new developments Sourcing Procurement Cost leadership (TCO) Public/Government/ Sustainable Improve image and relationships Environment/ Development & Address legacies & comply with new legislation Social Investment community Responsibility Securing raw materials for the expansion strategy is a crucial element Value in Flat products and Volume at long products 20
  • 22. Strategy We want to be one of the highest operating To be a key player in the Sub-Saharan margin steel producers globally Africa steel market Strategic drivers for creating value for our shareholders: Strategic goals • Sales revenue: • Industry leading value-creation for our shareholders: – Africa vs Export sales. – Positive economic value add over the steel cycle. – Increase production of value added products. • Sub-Saharan market leader: • Cost reduction: – 80% sales into Africa. – Efficiency improvements & technology upgrade (PCI). – Raw materials initiatives. • Improve operating capabilities: – Iron ore expansion projects. – Value-creating throughput increases of 2.6mtpa. – Reduce dependence on imported coking coal. – Procurement initiatives. • Build on our existing performance culture: – Create an environment that generates true employee pride and attracts, develops and retains top- • Throughput expansion: performing people. – Productivity improvements. – Productivities and de-bottlenecking. • Be a responsible corporate citizen. – Capital investments. • Corporate Social Responsibility: – Investment in community, environment & human resources. To be a key player in the Sub-Saharan Africa steel market while also being one of the highest operating margin steel producers globally 21
  • 23. Liquid steel development – 2006 to 2011 (Tonnes ‘000) 12 000 1 887 10 000 500 8 000 220 6 000 9 662 4 000 7 055 2 000 2006 New DRI kilns at Efficiencies Projects under 2011 Vdbp investigation Efficiency improvements play an important role in our expansion strategy 22
  • 24. Commitment to the Economy & Community 23
  • 25. Safety focus Lost Time Injury Frequency Rate (Employees and Contractors) The impact of the overall SHE programme is evident in our safety performance 7 Lost Time Injury frequency rate (LTIFR) indicators. The following was achieved during the first 6 months: 6 • H107 performance negatively affected by Blast Furnace rebuild. 5 • ArcelorMittal South Africa achieved 26 days without LTI (about 3.7m LTI free man hours). 4 • 172 days without an LTI at Saldanha Works - new record. 3 • 1m LTI free hours achieved: – 4x at Vanderbijlpark Works. 2 – 3x at Newcastle Works. 2002 2003 2004 2005 2006 2007 IISI ArcelorMittal South Africa (LTIFR) Blast Furnace D rebuild impacted on our most recent safety record 24
  • 26. Implementing an ambitious Corporate Social Responsibility strategy Waste/By- Air Pollution Water ISO 14001 product Management Management Management • Air pollution biggest • Saldanha and • 75% of waste/by- • All production environmental risk. Vanderbijlpark have products is recycled facilities are certified zero effluent status. or sold within the besides the • Planned projects: group. Dunswart DR Kiln • Newcastle to follow - Coke gas cleaning operation in 2008 after system completion of • Target is to achieve - New dust/fume crystalliser plant. a sale/ recycling rate • Target for Dunswart extraction system at • ArcelorMittal South of above 90% by certification is end both Vereeniging Africa’s consumption 2011. 2008. and Vanderbijl plant is world class at 3.2 - EAFMeltshop at m3/ton of LS both Vereeniging produced. and Vanderbijl plant - New sinter off gas cleaning system Future focus is on air quality 25
  • 27. Corporate Social Responsibility Current CSR projects • ArcelorMittal South Africa Science Centre Committed towards “making a - Partnership between Gauteng Department of Education and sustainable ArcelorMittal South Africa difference”. - 1 690 learners & teachers (Sedibeng District) receive maths & science classes from highly trained teachers - Renovations, upgrading & operations sponsored by ArcelorMittal South Africa (R8,5m in 2006). - High tech computer centre now completed (2007) Improving education. Corporate social Enhancing housing responsibility aligned • Enterprise Development Fund to assist SME’s in conditions. with government downstream steel sector (R250m) Addressing initiatives. HIV/Aids CSR • Gas cylinder project in conjunction with Department of Minerals & Energy. • HIV/AIDS program. • West Coast Business Development Centre. Forming strategic Invested R220m in alliances with Social Projects aimed at government empowering historically departments disadvantaged • Bophelong Community Project. communities. CSR focus is on Education, Housing and Job Creation 26
  • 28. Thank you ArcelorMittal South Africa Investors’ Day 12 September 2007